Big Pharma Claims Needs IP Monopolies to Fund Research but Spends 25X as Much on Stock Buybacks, Dividends
The Big Pharma’s fairy tale
There are few things in Washington more dangerous than Katie Porter with a white board.
The latest corporate executive unfortunate enough to be on the receiving side of the California representative’s piercing questioning was Richard A. Gonzalez, CEO of the pharmaceutical giant AbbVie, whom Porter took to task Tuesday during a House Oversight and Reform Committee hearing on price gouging by Big Pharma.
AbbVie is known for its flagship drug Humira — used to treat auto immune disorders like Crohn’s disease and rheumatoid arthritis. The company now charges $77,000 for a year’s worth of the medicine, “a 470 percent increase from when the drug entered market” in 2003, according to a new investigation from the committee.
In less than three minutes, Porter punctured what she called the “Big Pharma fairy tale” that U.S. customers need to pay such exorbitant prices so that drug companies can fund future innovation by investing in research and development. Porter began her interrogation of Gonzalez with a small pink circle of construction paper taped to her white board, representing the $2.45 billion AbbVie had invested in R&D from 2013 to 2018. She then grilled Gonzalez on the company’s other investments and expenditures.
Gonzalez had few of these figures at his finger tips. Porter came equipped with data — and other circles of construction paper scaled to the spending, which she taped to her white board as she unveiled them. That small pink R&D circle was soon eclipsed by a yellow circle representing marketing and advertising — $4.71 billion. And then dwarfed by a blue death star of stock buy-backs and dividends, which equaled $50 billion over the same period.
As Gonzalez squirmed in the spotlight, Porter then lowered the hammer, telling the CEO: “You’re feeding us lies that we must pay astronomical prices to get innovative treatments.”
She continued: “You’re spending all this money to make sure you make money, rather than spending money to invest in [and] develop drugs. … You lie to patients when you charge them twice as much for an unimproved drug. And then you lie to policymakers when you tell us that R&D justifies those price increases.”
“The Big Pharma fairy tale,” Porter added, “is one of groundbreaking R&D that justifies astronomical prices. But the Pharma reality is that you spend most of your company’s money making money for yourself and your shareholders. … The American people, the patients, deserve so much better.”
Watch a video of the exchange — and read full transcript — below:
Big Pharma says they need to charge astronomical prices to pay for research and development. Yet, the amount they spend on manipulating the market to enrich shareholders completely eclipses what's spent on R&D. Today, I confronted a CEO about the industry's lies, with visuals ⤵️ pic.twitter.com/c3jSLr0yVd
— Rep. Katie Porter (@RepKatiePorter) May 18, 2021
Porter: Mr. Gonzalez, how much did you spend, did AbbVie spent on litigation and settlements from 2013 to 2018?
Gonzalez: I don’t have that number. I can be happy to give it to you.
Porter: OK, $1.6 billion — $2.45 billion on R&D — $1.6 billion in litigation and settlements. What about marketing and advertising? How much did AbbVie spend on that?
Gonzalez: Well, marketing and advertising, we spend about $4 billion dollars a year.
Porter: Yep, $4.71 billion. How about executive compensation, 2013 to 2018?
Gonzalez: It’s probably on average about $60 million dollars a year.
Porter: Try $334 [million] on for size. Now, how much did AbbVie spend on stock buybacks… and dividends to enrich your shareholders from 2013 to 2018?
Gonzalez: Well, stock buybacks, if you actually look at just pure stock buybacks, it would be about $13 billion dollars.
Porter: Stock buybacks and dividends is the question, sir.
Gonzalez: Dividends? I’d have to come back with a number for that over that period of time.
Porter: $50 billion dollars. So, Mr. Gonzalez, you’re spending all this money to make sure you make money rather than spending money to invest in [and] develop drugs, and help patients with affordable life-saving drugs. You lie to patients when you charge them twice as much for an unimproved drug. And then you lie to policymakers when you tell us that R&D justifies those price increases.
The Big Pharma fairy tale is one of groundbreaking R&D that justifies astronomical prices. But the pharma reality is that you spend most of your company’s money making money for yourself and your shareholders. And the fact that you’re not honest about this with patients and with policy makers, that you’re feeding us lies that we must pay astronomical prices to get innovative treatments is false. The American people, the patients, deserve so much better.
I yield back.
Source: Rolling Stone